|  | | 2012 News and Press Releases | | |
SETTLEMENT NEWS:
Citigroup Settles Subprime Securities Suit for $590 Million
Kevin LaCroix
The D & O Diary. August 30, 2012
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EXCERPT: The parties to the Citigroup subprime-related securities class action lawsuit – one of the highest profile of the remaining subprime cases – have agreed to settle the suit for $590 million, in what is the third largest settlement so far out of the subprime and credit crisis litigation wave. Southern District of New York Judge Sidney Stein preliminarily approved the settlement on August 29, 2012, and scheduled a hearing for final approval on January 13, 2013. […] The Citigroup case was among the most prominent of the subprime cases because of Citigroup’s role in the mortgage-backed securities industry that contributed so significantly to the subprime meltdown, as well as because of the high-profile individuals involved in the case, including former Citigroup CEO Charles Prince and former Treasury secretary and Citigroup board member Robert Rubin. In addition, Citigroup’s attempt to settle the subprime-related SEC enforcement action for a payment of $285 was famously rejected by Southern District of New York Judge Jed Rakoff, a decision that is now on appeal before the Second Circuit. As discussed in detail here, in a November 9, 2010 Judge Sidney Stein narrowed the shareholders’ action against Citigroup and dismissed a number of the individual defendants. But what Judge Stein called the plaintiffs’ “principal” allegations survived the dismissal motion and remained in the case, as did seven of the individual defendants, including Prince and Rubin. The surviving allegation was the plaintiffs’ claim that Citigroup “did not disclose that it held billions of dollars of super-senior tranche CDOs.” The basic thrust of the plaintiffs’ CDO-related allegations is that though the company disclosed that it was deeply involved in underwriting CDOs, the company did not disclose that billions of dollars of the CDOs had not been purchased at all but instead had been retained by Citigroup. |
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